Has anybody from Jason down to your wife told you to just shut the [__] up already with Twitter?
Everybody tells me to shut the [__] up. You have to also understand who follows me.
And welcome back to another edition of the Business of Betting podcast. My name is Jeff Edelstein. I'm a senior analyst at Ingame. I'm joined today by Matt Kalish. Matt, good afternoon.
Hey Jeff, great to be with you.
So, everyone knows your backstory. Co-founder of DraftKings, now with Hard Scope, which you founded. We'll talk about all that later. But the first thing I want to ask you, I think I'm going to speak generally speaking for the world at large here. And to quote Jeff Lebowski, I'll use the parlance of our times. Yeah, you good. Rum. I'm amazing.
You know, it was funny. I was getting a lot of the, you know, crash out, which I used to only hear from my kids, you know, my middle schoolers. I'm minding my business. I was actually like on vacation in Mexico having a great time. Like last thing I wanted to do is be on the internet posting, but I just kind of like got a little ticked off by something and here we are. I felt like a small starting point kind of kept building into, you know, every time I turn over a stone there's something weird and yeah, it kind of turned into I almost feel like I'm a detective or something. It's a strange feeling but for sure no crash out but I am like really intellectually curious about hey what happens to my money here on these exchanges.
And so had you been thinking about this or was it when you noticed the Brooks Koepka, the difference in the odds based on how much you were willing to put down? Is that what triggered all this or had this been like percolating for some time?
Absolutely not. I mean, I retired from operating in the industry back I announced in November and was helping a little bit. You know, mostly I was kind of done in November, but helped a bit up until maybe March. My plan was to be out of the industry. The 14 years of building DraftKings was amazing, but I did my stint and I felt like my days of operating and going in the weeds like that were over. I just gamble a lot. Like, I really love gambling. Whatever it is, you know, I don't care if it's an exchange. I don't care if it's like a fantasy game or a sportsbook. I do casino, everything. I love the games. It's what got me into the industry. And I had nothing against, you know, Kalshi. At the time I thought it was exciting. I think the exchange innovations are like super good overall and I wanted to try it. Like I saw the marketing 50 states you can kind of bet sports. I was in Mexico. I'm like, I don't even know if it works in Mexico. It does. If anybody didn't know that Kalshi works in Mexico. So, PGA Championship, I gave it a shot. It was kind of like the product that was available where I was. You know, you probably know the rest of the story, but I was a little surprised by how it worked and not in a good way.
And it's one thing to note what you noted, which is basically, and correct me if I'm wrong, and I'm going to come at this from the everyman perspective, not from like somebody who covers the industry. Basically, if you want to put a small amount of money on Koepka, you were getting one set of odds and if you want to put bigger money on Koepka, you were getting a second set of odds. Is that more or less what happened that you saw?
More or less. I mean, I put in on Thursday, you know, I put in a bet on Koepka to win and it was kind of like my first time betting into the PGA Championship that week, you know. So, I fired I think it was like $10,000 or something and I see them listed at three cents, you know. So, I'm a sports bettor and a losing gambler for sure. I lose money. I just do it for fun. And I'm kind of like a regular user, you know, like a regular use case. What I expect is you show me it's three cents or whatever the price is, you know, it's the price. That's how sports betting works. You click the price, type in your dollar amount, hit bet, and you have a bet. In this case, god knows what happens. It gets sort of dumped off to Wall Street or somebody. The price is now 9 cents. Like he's 10 to one or something to win. Obviously, that's nonsense. No breakage alerts, nothing. It's just what the hell happened? Like I just snap dumped my bet into somebody way smarter than me, obviously, and instantly lost $4,000, probably five. And I let this go. And then it was the next day I come back on and I was just kind of like putting in a little bit more action. So they show me the same thing, but now I'm kind of like clocking it a little bit. So like why is it showing me 93 to 1 then I put in my bet and it's now 38 to 1? That makes no sense, right? But that's like I'm a normal bettor and made me think just like what happens to your money on these exchanges? Like this isn't sports betting to me. And that was kind of the tip off point of from there forward, every single thing I looked at, I'm like, what is going on with this company? And it was really I genuinely wanted to stop even like looking, but every single thing was something weird. And I just kept finding like the things that were being said, and this is not about all exchanges. This is about specifically Kalshi like marketing messages, comms, way that they look at data and talk about volume. Everything's weird. What data they're sharing with market makers, the stuff that they were representing was just so consistently different than what is actually going on that like I just don't trust this. I don't trust this, you know, and I am a trusting person. It's very hard to make me feel this way, but it's maybe one of the first times where I'm like, I just something's off here with these guys. What's going on?
What's interesting from I think from all of our perspectives of people who have been following this industry in one way, shape, or form or another is like your criticism comes out, you make your point, you get some blowback, you know, there's some back and forth on Twitter and you don't stop. You keep digging and you keep finding other things. Because you keep posting other things and you started listing them. Of all the things that you have, I'll put in air quotes discovered. What are some of the things that really stand out to you as real, you know, problems for you?
Well, there's some things I just think are kind of a bad experience due to the product and like the UI and UX not being very good. And there's some things that make me disdainful towards Kalshi and those are very different things. The marketing and comms practices particularly like consumer marketing has created like a strong disdain for how I look at that company now and it's very hard for me to not feel that way repeatedly seeing three, four times where promoting and marketing things like normal main street casual users have an edge over Wall Street and presenting it like this could be a job. I mean people are going to get into a pickle on Kalshi here listening to that. You know, when you're in the industry, the gambling industry for 14 years and you just see, you know, people love to go on the internet and say how good they are at gambling and they smash the house and it's all these pit sellers and a lot of fake stuff out there. And when people start to believe that though, they think, I mean, this is gambling. There's a house edge. If you gamble, you are going to lose long term. And to plant the idea like these normal main street people are advantaged over Wall Street who have models and APIs and data on them. They're profiling them. They know who you are. It's like they're not there for charity. Like that's a for-profit market making business. And same thing with the professional gamblers and everything. And these are things that I think if a DraftKings or a FanDuel ran with, we would lose our gambling license, you know, and it just seems like a really unethical and it created a lot of very disdainful feeling for me.
Now, I mean, I wouldn't be doing my job if I didn't point this out. I mean, when DraftKings launched, you know, back in '14, '15 and the marketing blitz that came with it, there was a lot of pushback that sounds similar, honestly, to what you're saying here, that anyone can win. You know, this could be a job. You know, I mean, if you remember the John Oliver bit with Seth Rogen, you know, where he gets in an argument with his wife, you know, his fake wife about like, you know, he's gonna make a living being a daily fantasy player. And on top of that, there's also obviously, you know, the legalization aspect of it. But putting that aside for a second, do you see a similarity between the marketing that they're doing and what you guys did, you know, a decade ago?
I lived through that. Lived experience matters. I mean like going through that was a nightmare and we paid severely for that and I know what the takeaways were. This was a very different time, you know, like we're talking about a time when there was kind of like nothing you could even do in sports in the US predicting things for real money. You could go to Vegas and bet like a retail sportsbook but there was no aside from offshore or something. There really wasn't like products out there. There wasn't marketing. Nobody knew what the product even was with fantasy. And I do see there being some similarity of like, yeah, I understand you want customers to become aware of the option like there's exchange betting now. Yes, you want that for sure. You want to tell anecdotal stories about almost like the Powerball would or something like this person had a successful thing. But where did we pay the consequences of that severely? It was the fact is that's not a typical user experience, right? It's like the typical user experience is 99% of people come on, you're playing for fun. House edge is going to do its natural course of things and you're going to lose money. And how do you not learn from that? Like I'm not by any means saying or not being accountable to those days, but I'm like when you're sitting there in 2026 and you've seen this movie, what are we doing? Like we have seen this movie before. I know exactly how this movie ends. What are they doing? And the ego, the lack of just any sort of instinct for it is I know I'm not being articulate. I know I'm being quite disrespectful. I know I'm using profanity. I know all of that. It bothers me deeply.
Do you think part of it comes from, you know, is it possible, and I'm not defending them, but is it possible that they're looking at it more from like leaning into the finance side of it and not looking at it from a gambling perspective? And I know that I feel like we're splitting hairs by saying that. And we're leaning into if it walks like a duck, looks like a duck, it's a duck. This is gambling, but by virtue of the legalities of it, they can't call it gambling, right? And you know it's event contracts and this, that, the other thing and they're coming from a finance lens as opposed to a gambling lens. Do you think that plays into the fact that they're not even thinking about what DraftKings and FanDuel did 10, 12 years ago with the marketing that they don't even see it or am I being naive?
You know my life got a lot better once I stopped thinking kind of like that and started thinking people know exactly what they're doing and you know what I'm saying. I used to like let everybody off the hook on things. I'm like, they're probably just they don't realize or they know what they're doing. And you can tell because when it's convenient, they're saying it's 50 state legal sports betting to consumers. What is Kalshi, right? Kalshi is a middleman that gets paid fees to introduce retail bet flow to Wall Street market makers, right? Wall Street market makers are the sportsbook. They're the house or pro gamblers or whatever. So when you're talking to their Wall Street buddies, they're a Wall Street infrastructure company. It's we're going to give you all this great retail bet flow, you'll make a bazillion dollars, just give liquidity on our platform. They're giving them rewards for the liquidity and all this. And that's how they're talking there. Then they're talking to regulators about how everything's super buttoned up and whatever, which has a lot of holes in it. And then with consumers though, they're saying, 'You have an advantage over these guys and it's 50 state legal sports betting. It's this like nice fun product. Here, download our app.' Like, do you know how much the app is completely inferior to even the website, never mind the API users that never in a million years looked at the app. You're not betting like the market. You're not betting against me or your friends or your peers. Like you are betting against a machine, a money-making machine that is nameless, faceless, and will do anything they can to make as much money as humanly possible. That is what that is.
So your criticisms against Kalshi to be clear, they are leveled at Kalshi and not against the model itself.
Correct. I don't think it's a bad product inherently. I mean, if I was a professional gambler or if I was like a highly skilled gambler, if I loved super competitive, complex problems. Yeah. Like the Wall Street firms, the hedge funds, they like beating each other up on different stuff all the time. But it's a game that is not casual and it's not fun. It's a dirty, dirty game. And if you think about all the little things, we're not talking about a product where you're just like, 'Let me predict who's going to win the game.' You're talking about where should I place my orders to maximize how fast I milk these retail users and do a tricky like the Brooks Koepka is somebody has like $10 staked at 93 to 1 and then my whole order gets filled at 38 to 1 below that like okay so all you have to do is throw a dollar up at a good price and bait somebody stupid like me to click it. I mean come on that is a shark game. It's a shark tank and it needs to be talked about in that way. Like it needs to be clear. This is chess. This is like you will get demolished if you don't study this and know what you're doing.
Using the Koepka bet again as the example, wouldn't you be running into the same problem at other exchanges? Like are they all operating under the same basic premise?
See, I don't even know because the only one I've used is Kalshi. Like if I had to use Polymarket, I've noticed Polymarket is getting pretty beat up as well in the news. Seems like maybe some of the same things, some are different things. What I've said, I've met like Tarek, I've met Shane before. I know them both. I found Shane more kind of like likable or charismatic and had like more pulse for the customer. And on social media, people seem to like them more on social media. I've noticed. I just haven't really seen anybody that likes Kalshi on social media other than their paid affiliates. That strikes me as weird. It's like everything that you see is bought and paid for. So, I'll give Polymarket the like in culture as a kind of media or just being relevant. They're definitely attracting some attention. But then the news is the news, right? Insider trading stuff they're dealing with and whatever is obviously... Look, I just didn't speak on it because that's not where I had the bet. It maybe is the exact same thing. I just don't know.
Well, from a PR perspective, it drives me bananas. Like both these companies, they seem any rake that's in the field, they're stepping on. You know, to me, it's insane, right? It's insane that they're offering markets on things that already happened and they're just begging for, you know, insiders to screw around with it. It's incredible to me that unlike DraftKings and FanDuel back in the day, instead of working together, they are at each other's throats and trying to put each other out of business as opposed to, you know, trying to like legitimize all of this. The company that you've helped found, DraftKings, obviously is launching their own version of all this, have launched their own version of this. You're on the board still with DraftKings. Was there any concern that taking to the airwaves like you have that it would look poorly upon DraftKings or the industry in general or you're just speaking for yourself?
I mean, yeah, I care for my former co-workers, my partners who were always so great to me. We had a great partnership. It was 14 years. Nothing bad ever really happened. I felt extremely well taken care of by Jason as my boss whenever and as a partner and as a friend. I don't mean to bring any bad attention to the company. If I do that, then, you know, I have to live with that and I'm accountable for that. And let's just say this, I'm more like the sort of person where I would probably like leave the board before not doing what I'm doing, if that makes sense. I just get out of their way, you know?
Has anybody from Jason down to your wife told you to just shut the [__] up already with Twitter?
Everybody tells me to shut the [__] up. You have to also understand who follows me. Like I don't have a massive audience, right? It's like 40,000 or something people, but it's a pretty specific audience. Like I have 4,000 plus Wall Street market makers that follow me from Jane Street, Susquehanna, etc. The amount of professional gamblers that follow me is like a huge number. It's an audience that is like very skewed towards the target. It's the people currently making money off exchanges. Why would you want that to stop? I understand that. To them, it's game. It's business. It is like we're here to make money. And that's I understand that. And I don't think there's any problem with this product existing. There should be hard games that are complicated, that are competitive. If people want to beat the hell out of each other, trading and doing all this crazy stuff with APIs and whatever, have a great time trading against each other. But don't market to me this is some nice sportsbook app I can just download and bet anything in 50 states and whatever and just put me into the meat grinder like that. Like that's crazy.
What do we think's going to happen though? I'm guessing that leading up to the NFL season that everyone else who is in this ring is going to go hard marketing wise like FanDuel, DraftKings like you know I'm talking California, Texas like I mean do you think the lessons learned at the heyday of DraftKings, FanDuel, etc. is their marketing going to be markedly different than what Kalshi's putting out there you know come August when they're trying to get the NFL dollars?
It's not from firsthand sitting there. I just know like I know the type of company DraftKings is. Are they competitive? Yeah. But they've been a consumer product business for 14 years building the top rated app. Like if you look at or anything all of the products that they ship are industry leading, they have the highest satisfaction, have the highest reinvestment rates in the customers. We have the best pricing typically speaking. There's a lot of pride in making normal people happy and giving a good experience. And there's also, like you were bringing up, a lot of sort of lived experience, a lot of scar tissue from feeling the implication of doing things if you do something wrong. Those things leave a mark forever and then you have systems for it, right? Like DraftKings would never mess something up like this. I mean, no way. But I do think that they're gonna compete and they're gonna market and they're gonna bring a great product. And I think Kalshi does not have that DNA. Like they don't have that consumer DNA at all, that instinct at all. And I try not to dismiss people, but I just don't see how they're going to make a normal person happy with that team and that culture and the type of product and the way they run that operation.
Did you ever see yourself being like I mean the torchbearer for all this and beyond that like again I've been covering this industry now for about six, seven years I would have to say in the Venn diagram of you know important people in the industry or in your case ex of the industry and volume and anger on Twitter it's about as high as it's ever been like you're hitting like both things here. I mean, did you ever see yourself getting so worked up about something like this that take it public?
